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No financial cataclysms looming over Luxembourg following political crisis - source

July 11, 2013, 4:43 UTC+3
“This situation has no links to the economy,” he stressed
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Photo EPA/ITAR-TASS

Photo EPA/ITAR-TASS

BRUSSELS, July 11 (Itar-Tass) - Luxembourg will not become “another Cyprus” after its Prime Minister Jean-Claude Junker announced his resignation late on Wednesday over a secret service scandal, a source in Junker’s office told Itar-Tass.

“The country’s economic model is unshakable, its financial and macroeconomic indices and its people’s welfare are among the best in the euro zone. Obviously, the political crisis will not improve Luxembourg’s credit rating, which is at its best, but its worsening is improbable, either,” the source said.

According to the source, the current government crisis is purely political and will be resolved through early elections and the appointment of a new cabinet.

“This situation has no links to the economy,” the source stressed.

The source however refused to comment on possible changes in Luxembourg’s tough position in the European debates over gradual cancellation of bank secrecy. “A new cabinet is to be formed first and then it will be possible to speak about changes in any spheres of the country’s politics,” the source noted.

Parallels between Luxembourg and Cyprus are drawn because of the disproportionately high, against the European standards, share of financial services in the economy and artificially favorable business climate. But whereas Cyprus’ financial sector failed and the government, in exchange for international help, had to give up its economic model of attracting money from foreign states that was discriminatory in respect of other European countries, Luxembourg’s financial sector is quite solvent and the country is not dependent on international creditors.

But the resignation of such an influential European politician as Jean-Claude Junker, who was among the founders of the present-day European Union and among the architects of the common European currency, might weaken Luxembourg’s positions on the international arena. Critics however say that the monetary union, created thanks to Junkers’ active efforts, has barely survived the crisis.

 

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